Hello World Mon Aug 01 2016 14:11:35 GMT+0000 (UTC)
A new fund to free Italy’s banks of bad loans will have at least €2.4bn of firepower, short of the government’s target for now but enough to deal with the immediate problems of Monte dei Paschi di Siena, the country’s embattled third-largest lender.
Italian banks and insurers have pledged at least €1.6bn in new money to Atlante 2 — as the private fund sponsored by the Italian government is called — ahead of Monday’s deadline for its first closing.
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In addition to the new contributions, Atlante 2 will also be funded by at least €800m transferred from Atlante 1, a similar fund created earlier this year to help rescue two struggling Italian banks in the northeastern region of Veneto.
The amount committed so far is below an expected minimum target of about €3bn, after a group of private pension funds — which had expressed an interest in placing €500m into Atlante 2 — balked at the opportunity in recent days. However, people involved in the fundraising say that additional commitments are still likely even after the first closing of the fund, so the final amount could yet be higher.
Atlante 2 is considered key to resolving Italy’s banking troubles because it is designed to mop up the mezzanine tranches of the non-performing loan portfolio of MPS. The Tuscan lender was the worst performer in European-wide banking stress tests last Friday.
The clean-up of MPS’s troubled loans is the precursor to a €5bn capital raising by the end of the year that Italian banking executives and government officials are counting on to save it from possible collapse and state intervention.
Atlante 2 will only use €1.6bn of its money to underwrite the clean-up of MPS’s troubled loans, with the remainder to be stored for further deals that may be required to assist other troubled Italian banks.
Some analysts said that the fundraising was unimpressive, given the scale of the bad loan problem afflicting Italian banks. Last weekend’s EU banking stress tests showed that almost 17 per cent of the loans at Italy’s biggest banks were non-performing at the end of the year, versus an average non-performing ratio of less than 5 per cent across the EU.
“Even if they reach the target for the specific MPS operation, the issue here is whether it will be enough for the next emergency,” says Wolfango Piccoli, an analyst at Teneo Intelligence in London.
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Others are less concerned. “The effort being made around Atlante is quite significant,” a banker working on the MPS deal said. “It would be wrong to read into a missed target a massive crisis of confidence, it’s more an understandable caution on the part of investors who do not want to jump into something where frankly the returns are unproven.”
The largest contributor to Atlante 2 in terms of new funds so far is SGA, a state-owned “bad bank” dating to the collapse of the Banco di Napoli, which has offered to put in €450m. Cassa Depositi e Prestiti, Poste Italiane and Generali, the insurer, are each expected to offer €200m, and UniCredit and Banca Intesa, Italy’s two largest banks, are expected to put in €155m each. Meanwhile, Unipol, the insurer, is expected to contribute €100m into Atlante 2.
One person involved in the fundraising said small banks might also contribute a total of €100m, while BNP and Mediobanca may also make new commitments. In, addition some of the private pension funds could still jump in even if they are no longer being counted on and people close to the fundraising say they are not needed.
“We are still waiting for the conditions, so that we can make a decision,” Alberto Oliveti, president of Adepp, the association of private pension providers, told the Financial Times. “We have to make sure we can do something like this, and we have to make sure it’s convenient, from a broad perspective that is good for the country, not just merely financially.”